Stronger foreign direct investment (FDI) from Europe are expected to flow to Vietnam, into high-valued projects in the long term, when the EU- Vietnam free trade and investment protection agreements come into force, according to Marko Walde, chief representative of the Delegation of German Industry and Commerce in Vietnam.  

Marko Walde, chief representative of the Delegation of German Industry and Commerce in Vietnam. Photo courtesy: AHK Vietnam

“I strongly believe that there will be stronger FDI flows for high-valued projects into Vietnam, in the long term, including from Germany. German investors would bring their well-known technology in management and training, allow more value-added production, less waste of material and resources,” Marko Walde said in response to Hanoitimes’ request for comment.

The European Parliament on February 12 passed the EVFTA, which is the most ambitious trade agreement with a developing country according to the EU definition. The agreement is hoped to come into force in July after Vietnam’s parliament is poised to approve it in the upcoming gathering late in May.

Walde noted that AHK Vietnam strongly supports the ratification of the EVFTA and EVIPA. “The EVFTA is a clear commitment for reliable trade based on transparent rules.”  

Once it enters into force, the EVFTA will begin to phase out almost 99% of tariff lines and barriers to trade between Vietnam and the EU. Tariffs on two-thirds (65%) of EU exports and 71% of Vietnamese exports will be eliminated the moment the agreement enters into force, with the rest being phased out over a decade-long implementation period.

The EVFTA agreement will bring the customs facilitation, exchanging information on custom requirements; investing in the modernization, simplification of customs procedures and ensuring transparency of all custom requirements. New market access opportunities across a range of sectors will be also created thanks to this agreement.

Once the EU-Vietnam FTA and IPA come into effect, European and German companies could enjoy protection of investments with trade facilitations and easier market access in the short term. In the mid-term, German investors are expected to increase investments in Vietnam based on the improved conditions here.

With the two agreements, the Vietnamese market offers many potential opportunities for German companies in almost all sectors especially in automobile, machinery, green energy, electronics, IT, food processing and health care sectors, Walde noted.

The agreement is important for the German economy, because Vietnam has a trade volume of around EUR14 billion - comparable to Canada - and Vietnam is Germany's second biggest trading partner in the ASEAN region. More than 4,000 German companies have already been exporting to Vietnam, thereof 69% are small and medium-sized enterprises (SMEs).

In times of increasing international trade conflicts and erosion of the world trade rules, the new agreement is an essential sign for rules-based trade and fair competition, AHK Vietnam said in a separate statement.

The EVFTA also includes important provisions on environmental protection and labor rights, ensuring that Vietnam’s continued economic growth does not come at the cost of its natural heritage and keeps Vietnam on the path of stronger standards at work, according to EuroCham.